GAME OVER: IS THIS THE END OF THE GAMING DVD?

Gamers worldwide have been following stories of Game UK’s demise with increasing curiosity.  A lot of Indian gamers were disappointed to see the store go into administration.  Admittedly, most of us based our best wishes for The Game Group based on our experiences (and cheap prices) with their website.  Those closer to the erstwhile retail giant’s physical stores felt otherwise.  For instance, here is a comment from a reader from the Guardian’s coverage  of the event that sums up a lot of what customers in the UK are feeling:

“Ask any gamer why they don’t shop at Game anymore. Price. Range. Poor Customer Service.”

The Game UK Website wore a "down for maintenance" notice as well.

Those are probably the three most important things that drive any business — it doesn’t matter whether the business is a brick and mortar store or an online site.  While our assessment of the coverage shows that Game’s outcome was driven by a series of incorrect business decisions, it does belie the question: what about the gaming market?  Will all stores eventually close?  We have seen how the music industry has been taken over by online (legal and illegal) downloads and no-one ever buys CDs anymore — is that what will happen to gaming as well? Considering how we are investing our lives savings into the GamesINC franchise, you can imagine how important this was for us.

But like what any business should do before they launch, this is one of the considerations we took into account early on.  And it is being supported by those in the industry sharing their opinions in the wake of Game’s demise.

Our take is that we are still between five and ten years away from going completely digital (more infrastructurally advanced countries may see the change in five years and we expect India to make the shift in 7-10 years).  So here is our no-numbers (well almost) quick assessment of the future (we can’t share all our IP on our blog now, can we?):

Software Requirements

Video graphics have come a long way in the last decade.

The top reasons why we love the console — the graphics, sounds, and features — eventually translate into massive software storage requirements.  An XBOX game can take up to 8GB in storage whereas a PS3 game can go beyond 15GB.  A digital download that size is still a nascent possibility in the UK and U.S., and a near impossibility in “fair” usage policy afflicted India.  Even without fup, I’d feel a tinge of guilt spending all my bandwidth on games — sort of like the guilt you feel when you print out a hundred pages on your work printer.  With time, the size of games will only increase, not decrease.  That said, there is a distinct possibility that — if the XBOX720(?) and the PS4(?) allow — the market moves to SD cards as an alternative to DVDs.  That will possibly be a step in the right direction and will enhance the lives of our consoles significantly.  In either case, there will be no impact on online and physical retail stores who will still have something to sell.

Internet Infrastructure

The biggest bane of online downloads is not fup, but overall infrastructure support in the country.  Downloading a 8GB game is hardly the same as downloading a 100MB music album.  Chances are high that even before games are delivered online-only, movies will take the plunge.  If a large proportion of the customer base moves to streaming videos, DVD and BluRay downloads, and game downloads, free bandwidth will become scarce.  Our Airtels, BSNLs, and Reliances will hardly be able to keep pace with the upgrades required. Of course, not all of these scenarios will come to pass all at the same time, so I am admittedly being more catastrophic than the situation demands.  However, if you look at how our ISPs have taken a reactive, almost regressive, stand toward business and have focused on acquiring customers that they know they won’t be able to sustainably serve with the current infrastructure, we see a lot of pain in the coming days — with or without massive digital downloads.

Compare your speed to those around the world and you can see that we are not nearly ready. Source: http://bit.ly/GYWiAs

Business Sense

The most important factor that will determine whether the gaming world goes digital is the amount of business sense it makes.  When Microsoft launched the XBOX, it was estimated to be losing $125 per box just on cost of goods.  It takes a lot of time, effort, and R&D money to design a new console — 10 years is a completely legitimate timeframe for such companies to ride the tide.  Companies will still make money through online sales of passes, DLCs, and (some) games.  It was only about 4 years ago that Microsoft started to make money off its console business and followed it up with about $1Billion in profit in early 2011 thanks to the Kinect.   It is too early to try to change the entire gaming environment by moving to digital downloads.  Remember the first XBOX and the red ring of death?  If Microsoft tries to change its hardware in a way that goes beyond extracting more performance, then it might well run into another couple of years of technical nightmares.  Its not that they can’t build a great system, but that it is unreasonable to expect that the first attempt will be perfect.

Beyond the technical aspects, there is also an entire logistical and delivery system associated with ensuring that a game DVD reaches the end-user.  A new delivery channel — technical and server upgrades for every publisher wishing to offer digital downloads, for instance — will need to be built. That does not come overnight.  We can speculate all we want on what the new XBOX720(?) or the PS4(?) will bring, but one thing that new consoles will not bring is automated upgrades for all service providers in the value chain.  It is still possible, but this will not be the revolution everyone expects — it will in fact push back innovation by a couple of years while we transition to the next infrastructure and game publishers themselves understand the new platform.

The change from physical media to online digital downloads cannot be avoided and will happen, whether some of us want it or not.  Companies, suppliers, and retailers will have to innovate or die.  But it is still a few years out in the future.  In the meantime though, it is not business as usual.  In India, we have a lot of work to do.  Unlike most other ventures — online and offline — the gaming market itself is nascent here.  We can’t sit back, look at those burgeoning numbers that consultants share with us, and expect the money to keep flowing in.  India is still not taken seriously as a gaming market.  We retailers, developers, and gamers have to build the market together.  But that is a story for another time.

How far out do you think the digital media revolution is?  Do you think Indian infrastructure and gaming market is ready for it?  Share your thoughts in the comments below.

Research and articles sourced from:

Advertisements